MOHIT KUMAR,GHAZIABAD vs. PR. CIT, GHAZIABAD

This appeal is filed by the assessee against the order of the ld Pr. CIT, Ghaziabad dated 22.03.2019 u/s 263 of the Income Tax Act, 1961 holding that the assessment order passed by the ld ITO-1(4), Ghaziabad dated 06.09.2016 u/s 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of revenue and thereby the ld AO was directed to add to the assessee’s income Rs. 7.7 lakhs being loan received by the assessee from Mrs. Goldie Singhal, sister of the assessee, whose creditworthiness could not be established.

The brief facts of the case shows that the assessee is an individual who filed his return of income on 31.07.2014 declaring total income of Rs. 345020/-. The case was selected under CASS for limited scrutiny to verify large investment in property as compared to total income. The ld AO passed an order u/s 143(3) of the Act on 06.09.2016 accepted the return of income of the assessee. During the course of assessment proceedings the assessee filed replies to the queries raised and no addition was made to the total income.

The ld Pr. CIT on examination of the record noted that the some discrepancies were noticed in the order of the ld AO and thereby a show cause notice was issued to the assessee on 11.03.2019. The show cause notice states that case of the assessee was selected to verify the large investment made by assessee during the year under consideration on limited scrutiny criteria. During the course of assessment proceedings, with respect to the source of investment, assessee disclosed that he has received a loan of Rs. 5 lakhs from Sumit Singhal HUF, Rs. 5 lakhs from Punit Singhal HUF, Rs. 7.7 lakhs from Mrs. Goldie Singhal sister of the assessee. The ld CIT further noted on examination of bank statement of Mrs. Goldie singhal that she has deposited cash in her bank account on various dates. In response to the show cause notice assessee submitted that he has submitted the copy of confirmation of loan and bank account with Union Bank of India of the lender and copy of ROI. The assessee also disclosed that Rs. 4,70,000/- on 04.04.2013 was deposited by the lender with the assessee through banking channel and the source of such funds was also explained. The other receipts were also found through banking channel and sources were disclosed. With respect to partial sum of Rs. 49160/- and Rs. 50,000/- , she deposited with the assessee through banking channel but were out of cash deposit by the lender in her bank account out of income of the lender. The assessee submitted the return of income of the lender. The assessee also submitted that the assessee submitted these details before the ld AO who examined the same and accepted it. The ld CIT noted that the assessee did not furnish any documentary evidence regarding change of name of Mrs. Goldie Singhal to Mrs. Pratibha after her marriage; therefore, she did not accept the copy of the return of income as well as the PAN of Mrs. Goldie Singhal in her married name. She otherwise stated that the return of income for AY 2013-14 does not show a significant income in her hand. Therefore, she held that the creditworthiness of Mrs. Goldie Singhal remains un-established and loan of Rs. 7.7 lakhs extended by her to the assessee during the year deserves to be treated as unexplained cash credit u/s 68 of the Act. Therefore, she held that the order of the ld AO is erroneous and prejudicial to the interest of revenue. She directed the ld AO to add the income of Rs. 7.7 lakhs being loan received by the assessee from Mrs. Goldie Singhal. Such order was passed u/s 263 of the Act on 22.03.2019.

The ld AR submitted that during the course of assessment proceedings the complete details in the form of confirmation, income tax return, bank passbook of the lenders were produced. Same were examined by the ld AO and he accepted the loan. Therefore, during the course of assessment proceedings, complete examination was made. He further submitted that the ld CIT merely because out of 7.7 lakhs of loan, lender deposited a paltry sum of Rs 990000/- as cash in her bank account, has directed the ld AO to add the whoe sum of Rs 7.7 lakhs. He further referred that in the order u/s 263 Pr. CIT has held that source of deposit in her bank account by way of cash deposit have not been explained. Therefore, he submitted that other than cash deposit the loan emanating from her bank account have been accepted by the ld Pr.CIT also but still she has directed to make the addition of the total loan.

He also raised the issue that the case of the assessee was selected under CASS for limited scrutiny for verification of large investment in property as compared to total income. The order of the ld CIT does not speak about any addition on that account. Instead of that it talks about something else i.e. addition u/s 68 of the Act of loan taken from the sister which was not an issue before the ld AO under limited scrutiny. Therefore, naturally the issue which was not for the limited scrutiny could not have been examined, though extensively examined by the ld AO, does not given a rise to the jurisdiction of the CIT to revise an order u/s 263 of the Act on the issues which were not the issues of limited scrutiny. He therefore, submitted that the order passed by the ld Pr. CIT is not sustainable under law.

The ld CIT DR vehemently supported the order of the ld Pr. CIT on the merits. She further submitted that case of the assessee was selected to verify large investment in property and source of such investment are required to be examined by the ld AO. If the source is not examined, which is a loan from sister of the assessee then CIT was correct in assuming the jurisdiction u/s 263 of the Act.

We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present case admittedly, the case was selected